Rate Hikes Unlikely to Outlast Pre-New Year Cargo Surge

Rate Hikes Unlikely to Outlast Pre-New Year Cargo Surge

The next two weeks will be the most frantic period of 2013 for China loadings to Europe and the U.S., with carrier utilization already running at “well above” 90 percent, said Henry Schmidl, director of ocean freight for Hong Kong and South China at Schenker International.

“We will probably see full utilization of ships within the next two weeks,” he told the JOC. “Like every year, the pre-Chinese New Year holiday weeks are the busiest period of the year for exports from China with substantial increases in volumes,” he said.

Asked about how liner GRIs and PSSs would perform in light of excess vessel capacity, Schmidl responded: “There will be additional capacity, and the outlook for market growth is almost on par with last year’s growth. Purely from the supply and demand perspective, a rate increase does not seem likely. However, we should not forget that low rate levels in the past were not sustainable in the long-run. Carriers had to implement measures of balancing supply and demand by keeping some of their vessels idle whilst raising their rates, in order to be more on par with market development. We have seen substantial increase of freight rates in the first half of last year not necessarily because of a shortage of capacity, but rather carriers' need to return to profitable levels.”

Schenker operates a preferred carrier program together with capacity and allocation management systems to reduce the impact of the demand surge on customers’ shipments during peaks such as Chinese New Year.

“Without doubt, that requires early and accurate forecasts that are received from most of our main customers,” he said. “Bookings with no or short notice might have to wait for the next sailing, because maximum utilization has already been achieved.”

Contact Mike King at michael@borderline.eu.com.

[Editorial Note: Revised 1/28/2013 to updated comments in the third paragraph.]